Filing Information [Registrant Information](index=1&type=section&id=Registrant%20Information) Knightscope, Inc., a Delaware corporation headquartered in Mountain View, CA, is filing its Quarterly Report on Form 10-Q for the period ended March 31, 2025 - Knightscope, Inc. is a Delaware corporation with its principal executive offices in Mountain View, CA[1](index=1&type=chunk)[2](index=2&type=chunk) - The company's Class A Common Stock trades on The Nasdaq Capital Market under the symbol KSCP[3](index=3&type=chunk) [Filer Status and Stock Information](index=1&type=section&id=Filer%20Status%20and%20Stock%20Information) Knightscope is classified as a non-accelerated filer and a smaller reporting company, and it is not a shell company - The registrant is a non-accelerated filer and a smaller reporting company, and is not a shell company[4](index=4&type=chunk) Outstanding Common Stock as of May 9, 2025 | Class of Stock | Shares Outstanding | | :------------- | :----------------- | | Class A Common Stock | 6,564,466 | | Class B Common Stock | 336,759 | Cautionary Note on Forward-Looking Statements [Forward-Looking Statements and Associated Risks](index=4&type=section&id=Forward-Looking%20Statements%20and%20Associated%20Risks) This report contains forward-looking statements regarding future operations, financial position, business strategy, and market growth, subject to significant risks and uncertainties - Forward-looking statements in this report cover future operating results, financial position, business strategy, market growth, and product development, and are subject to various known and unknown risks and uncertainties[9](index=9&type=chunk)[10](index=10&type=chunk) - Key risks include the need for significant capital resources, market acceptance of products, ability to protect intellectual property, limited operating history, and the ability to continue as a going concern[11](index=11&type=chunk) - The company has not yet generated profits or significant revenues, anticipates continued losses, and its independent registered public accounting firm expresses substantial doubt about its ability to continue as a going concern without securing additional funding[11](index=11&type=chunk) PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents Knightscope's unaudited condensed financial statements, showing increased assets and equity, reduced net loss, and improved cash flow from operations [Condensed Balance Sheets](index=6&type=section&id=Condensed%20Balance%20Sheets%20as%20of%20March%2031%2C%202025%20and%20December%2031%2C%202024%20(Unaudited)) Condensed Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change | | :----------------------------- | :------------- | :---------------- | :----- | | Total Assets | $29,810 | $28,185 | +$1,625 | | Total Liabilities | $11,647 | $12,404 | -$757 | | Total Stockholders' Equity | $18,163 | $15,781 | +$2,382 | | Cash and Cash Equivalents | $12,661 | $11,124 | +$1,537 | | Accounts Receivable, net | $2,014 | $1,731 | +$283 | | Inventory | $1,607 | $1,797 | -$190 | | Total Current Assets | $17,072 | $15,099 | +$1,973 | | Total Current Liabilities | $7,513 | $8,265 | -$752 | [Condensed Statements of Operations](index=7&type=section&id=Condensed%20Statements%20of%20Operations%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024%20(Unaudited)) Condensed Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | Change | % Change | | :------------------------------------- | :---------------------------- | :---------------------------- | :----- | :------- | | Total Revenue, net | $2,917 | $2,254 | +$663 | +29.4% | | Total Cost of Revenue, net | $3,585 | $3,699 | -$114 | -3.1% | | Gross Loss | $(668) | $(1,445) | +$777 | -53.8% | | Total Operating Expenses | $6,160 | $6,835 | -$675 | -9.9% | | Loss from Operations | $(6,828) | $(8,280) | +$1,452 | -17.5% | | Net Loss | $(6,897) | $(7,592) | +$695 | -9.2% | | Basic and Diluted Net Loss per Common Share | $(1.28) | $(3.99) | +$2.71 | -67.9% | [Condensed Statements of Preferred Stock and Stockholders' Equity (Deficit)](index=7&type=section&id=Condensed%20Statements%20of%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024%20(Unaudited)) Stockholders' Equity Changes (in thousands) | Metric | Balance as of Dec 31, 2024 | Stock-based compensation | Proceeds from Equity Sale, net | Proceeds from Direct Registration Offering | Net Loss | Balance as of Mar 31, 2025 | | :----------------------------- | :------------------------- | :----------------------- | :----------------------------- | :--------------------------------------- | :------- | :------------------------- | | Total Stockholders' Equity | $15,781 | $422 | $7,411 | $1,436 | $(6,897) | $18,163 | - All preferred stock was converted into Class A or Class B Common Stock on May 15, 2024, resulting in no preferred stock remaining outstanding[96](index=96&type=chunk) [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024%20(Unaudited)) Condensed Statements of Cash Flows Highlights (in thousands) | Metric | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | Change | | :-------------------------------------- | :---------------------------- | :---------------------------- | :----- | | Net cash used in operating activities | $(6,375) | $(8,611) | +$2,236 | | Net cash used in investing activities | $(449) | $(894) | +$445 | | Net cash provided by financing activities | $8,259 | $9,710 | -$1,451 | | Net change in cash, cash equivalents and restricted cash | $1,435 | $205 | +$1,230 | - The decrease in net cash used in operating activities was primarily due to a lower net loss and favorable changes in assets and liabilities, partially offset by a decrease in the change in fair value of warrant and derivative liabilities and a loss on disposal of ASRs[158](index=158&type=chunk) [Notes to Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Financial%20Statements%20(Unaudited)) [NOTE 1: The Company and Summary of Significant Accounting Policies](index=10&type=section&id=NOTE%201%3A%20The%20Company%20and%20Summary%20of%20Significant%20Accounting%20Policies) Knightscope, Inc. is a public safety innovator building AI-driven Autonomous Security Robots (ASR) and Emergency Communication Devices (ECD) for the U.S. market - Knightscope, Inc. is a public safety innovator that builds Autonomous Security Robots (ASR) and Emergency Communication Devices (ECD), providing AI-driven solutions to the U.S. public safety market[31](index=31&type=chunk)[32](index=32&type=chunk) - The company's financial statements are prepared on a going concern basis, but historical losses and negative cash flows raise substantial doubt about its ability to continue as a going concern without additional fundraising[37](index=37&type=chunk)[38](index=38&type=chunk) - A **1-for-50 reverse stock split** for Class A and Class B Common Stock became effective on September 13, 2024, with all share and per-share amounts retroactively adjusted[39](index=39&type=chunk) [NOTE 2: Revenue and Deferred Revenue](index=17&type=section&id=NOTE%202%3A%20Revenue%20and%20Deferred%20Revenue) Revenue is generated from ASR leases and ECD sales, with deferred revenue primarily from Machine-as-a-Service subscriptions - Revenue is derived from ASR leases (operating leases, recognized ratably over 12-month terms) and ECD sales (recognized upon completion of services or product delivery)[72](index=72&type=chunk)[74](index=74&type=chunk) Revenue by Product Line (in thousands) | Product Line | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | Change | % Change | | :----------- | :---------------------------- | :---------------------------- | :----- | :------- | | ASRs | $1,182 | $990 | +$192 | +19.4% | | ECDs | $1,735 | $1,264 | +$471 | +37.3% | | Total | $2,917 | $2,254 | +$663 | +29.4% | - Deferred revenue, primarily from Machine-as-a-Service (MaaS) subscriptions billed annually in advance, decreased from **$1.88 million** at December 31, 2024, to **$1.34 million** at March 31, 2025[75](index=75&type=chunk)[78](index=78&type=chunk) [NOTE 3: Fair Value Measurement](index=18&type=section&id=NOTE%203%3A%20Fair%20Value%20Measurement) Fair Value of Cash Equivalents (in thousands) | Asset Category | March 31, 2025 | December 31, 2024 | Level | | :------------- | :------------- | :---------------- | :---- | | Money market funds | $11,034 | $10,638 | Level 1 | - As of March 31, 2025, there were no Level 3 liabilities measured at fair value on a recurring basis, as preferred stock warrant liabilities were reclassified to equity in 2024[86](index=86&type=chunk)[149](index=149&type=chunk) [NOTE 4: Debt Obligations](index=20&type=section&id=NOTE%204%3A%20Debt%20Obligations) Debt Obligations (in thousands) | Debt Type | March 31, 2025 | December 31, 2024 | Change | | :------------------------------------------------- | :------------- | :---------------- | :----- | | Bonds, net | $3,971 | $3,952 | +$19 | | August 2024 Note | $909 | $1,364 | -$455 | | Insurance Notes | $458 | $0 | +$458 | | Total Debt | $5,338 | $5,316 | +$22 | | Less: current portion of debt obligations | $(1,367) | $(1,364) | -$3 | - The August 2024 Note, a **$3.0 million** senior secured promissory note, had an outstanding balance of **$0.9 million** as of March 31, 2025, down from **$1.4 million** at December 31, 2024[93](index=93&type=chunk)[95](index=95&type=chunk) - The company financed **$371 thousand** in additional business insurance premiums in February 2025, with an outstanding balance of **$458 thousand** as of March 31, 2025[94](index=94&type=chunk)[95](index=95&type=chunk) [NOTE 5: Capital Stock and Warrants](index=21&type=section&id=NOTE%205%3A%20Capital%20Stock%20and%20Warrants) - All outstanding preferred stock was automatically converted into Class A or Class B Common Stock on May 15, 2024, and preferred warrants were reclassified from liabilities to equity[96](index=96&type=chunk)[97](index=97&type=chunk) - The company's authorized Class A Common Stock was doubled to **228 million shares**, and **40 million shares** of 'blank check' preferred stock were authorized by stockholders[98](index=98&type=chunk)[129](index=129&type=chunk)[131](index=131&type=chunk) Outstanding Warrants as of March 31, 2025 | Class of shares | Number of Warrants | Exercise Price | Expiration Date | | :----------------------------------------- | :----------------- | :------------- | :-------------- | | Class A Common Stock (previously Series m-3 Preferred Stock) | 28,656 | $200.00 | Dec 31, 2027 | | Class A Common Stock (previously Series S Preferred Stock) | 121,455 | $93.87 | Dec 31, 2027 | | Class A Common Stock (Vendor Warrants) | 2,929 | $0.001 | 6 years from each issuance | | Class A Common Stock (Underwriter Warrants) | 36,300 | $18.29 | Nov 21, 2029 | [NOTE 6: Stock-Based Compensation](index=23&type=section&id=NOTE%206%3A%20Stock-Based%20Compensation) Stock-Based Compensation Expense (in thousands) | Expense Category | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | Change | | :--------------- | :---------------------------- | :---------------------------- | :----- | | Cost of revenue, net | $46 | $57 | -$11 | | Research and development | $148 | $122 | +$26 | | Sales and marketing | $21 | $48 | -$27 | | General and administrative | $207 | $107 | +$100 | | Total | $422 | $334 | +$88 | - The weighted average grant date fair value of options granted during the three months ended March 31, 2025, was **$2.28 per share**[111](index=111&type=chunk) - As of March 31, 2025, unamortized stock-based compensation expense was **$2.1 million**, to be recognized over a weighted average remaining vesting term of **1.4 years**[112](index=112&type=chunk) [NOTE 7: Commitments and Contingencies](index=25&type=section&id=NOTE%207%3A%20Commitments%20and%20Contingencies) Operating Lease Liabilities (in thousands) | Lease Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Operating lease right-of-use assets | $265 | $407 | | Total operating lease liabilities | $268 | $412 | | Operating lease costs (Q1) | $190 | $989 | - The company has a purchase commitment of **$0.8 million** for ASR raw materials, with **$80,000** paid in the three months ended March 31, 2025[116](index=116&type=chunk) - A use tax liability of **$0.4 million** has been recorded as of March 31, 2025, for potential sales tax exposure on its MaaS product offering[119](index=119&type=chunk) [NOTE 8: Segment Information](index=26&type=section&id=NOTE%208%3A%20Segment%20Information) - Knightscope operates as a single reportable segment, with its Chief Executive Officer (CODM) reviewing financial information at a company level for resource allocation and performance evaluation[40](index=40&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) - All long-lived assets are located in the United States, and substantially all revenue is attributed to sellers and buyers based in the United States[40](index=40&type=chunk) [NOTE 9: Subsequent Events](index=26&type=section&id=NOTE%209%3A%20Subsequent%20Events) - On April 9, 2025, Knightscope entered into a sublease agreement for **33,355 square feet** of office space in Sunnyvale, California, to serve as its new corporate headquarters[115](index=115&type=chunk)[122](index=122&type=chunk) - The sublease term commenced on April 16, 2025, and expires on June 30, 2030, with total lease payments of approximately **$5.27 million**[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Knightscope's financial condition and results, highlighting its mission, capital structure changes, operational improvements, and ongoing liquidity challenges [Overview](index=27&type=section&id=Overview) - Knightscope is dedicated to transforming public safety through AI-driven robotics (ASRs), emergency communication solutions (ECDs), and real-time monitoring via cloud-based platforms like KSOC, KEMS, and KNOC[125](index=125&type=chunk)[126](index=126&type=chunk) - The company's products are manufactured in the United States and provide scalable, 24/7 autonomous monitoring and proactive threat deterrence[125](index=125&type=chunk)[126](index=126&type=chunk) [Recent Developments](index=28&type=section&id=Recent%20Developments) - The company completed a **1-for-50 reverse stock split** on September 13, 2024, and doubled authorized Class A Common Stock to **228 million shares** on April 5, 2024[127](index=127&type=chunk)[129](index=129&type=chunk) - All outstanding preferred stock was converted to common stock on May 15, 2024, and **40 million shares** of 'blank check' preferred stock were authorized[130](index=130&type=chunk)[131](index=131&type=chunk) - Warrants with anti-dilution features were extinguished on August 1, 2024, in exchange for a **$3.0 million** senior secured promissory note[132](index=132&type=chunk)[133](index=133&type=chunk) - Operational efficiency efforts are showing promise, including streamlined field services for ECD clients and improved ASR K5 v5 performance, leading to higher install base and customer retention[134](index=134&type=chunk)[135](index=135&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Key Financial Results (in thousands) | Metric | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | Change | % Change | | :------------------------------------- | :---------------------------- | :---------------------------- | :----- | :------- | | Total Revenue, net | $2,917 | $2,254 | +$663 | +29.4% | | Gross Loss | $(668) | $(1,445) | +$777 | -53.8% | | Total Operating Expenses | $6,160 | $6,835 | -$675 | -9.9% | | Net Loss | $(6,897) | $(7,592) | +$695 | -9.2% | - Total revenue increased by approximately **$0.7 million**, driven by a **$0.4 million** increase in service revenue and a **$0.2 million** increase in product revenue[140](index=140&type=chunk) - General and administrative expenses decreased by approximately **$0.9 million (24%)**, primarily due to **$1.0 million** lower investor relations fees and **$0.3 million** lower third-party professional fees[147](index=147&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity Position (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :----------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $12,661 | $11,124 | | Total stockholders' equity | $18,163 | $15,781 | | Working capital | $9,559 | $6,834 | - Despite increased cash and equity, the company's ability to continue as a going concern is in substantial doubt due to historical losses and dependence on additional financing, which may dilute existing stockholders[150](index=150&type=chunk) - In Q1 2025, the company generated approximately **$7.4 million** in net proceeds from its at-the-market (ATM) offering program and **$1.7 million** in gross proceeds from a registered direct offering[153](index=153&type=chunk)[154](index=154&type=chunk) [Critical Accounting Estimates](index=33&type=section&id=Critical%20Accounting%20Estimates) - There have been no material changes to the company's critical accounting estimates from what was reported in the Annual Report on Form 10-K[162](index=162&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Knightscope is exempt from providing quantitative and qualitative disclosures about market risk - The company is not required to provide information under this item as it is a smaller reporting company[163](index=163&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that Knightscope's disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025[165](index=165&type=chunk) - There were no material changes in internal control over financial reporting during the three months ended March 31, 2025[166](index=166&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Knightscope is not currently a party to any material legal proceedings and is unaware of any pending or threatened litigation that could materially affect its business - The company is not presently a party to any material litigation and is unaware of any pending or threatened litigation that could materially adversely affect its business or financial condition[169](index=169&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously discussed in the company's 2024 Annual Report on Form 10-K - No material changes in risk factors were reported compared to the 2024 Annual Report on Form 10-K[170](index=170&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds were reported[171](index=171&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - This item is not applicable to the company[172](index=172&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[173](index=173&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) No disclosures in lieu of Form 8-K, material changes to director nominee procedures, or insider trading arrangement adoptions/terminations were reported during Q1 2025 - No disclosures in lieu of Form 8-K, material changes to director nominee procedures, or insider trading arrangement adoptions/terminations were reported during Q1 2025[174](index=174&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, operational agreements, and regulatory certifications - The exhibits include corporate governance documents (Certificate of Incorporation amendments, Bylaws), operational agreements (Sublease, Consent to Subletting), and regulatory certifications (CEO/CFO certifications, XBRL documents)[175](index=175&type=chunk) Signatures [Report Signatures](index=36&type=section&id=Report%20Signatures) The Quarterly Report on Form 10-Q was duly signed on May 14, 2025, by William Santana Li and Apoorv Dwivedi - The report was signed on May 14, 2025, by William Santana Li, Chairman, Chief Executive Officer and President, and Apoorv Dwivedi, Executive Vice President and Chief Financial Officer and Secretary[179](index=179&type=chunk)[180](index=180&type=chunk)

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $2.9 billion, a 29% increase from $2.3 billion in Q1 2024, driven by growth in both service and product revenue [6][12] - Service revenues grew to approximately $2.1 billion, up 25% from $1.7 billion the previous year, primarily due to strong ASR subscriptions and full-service maintenance agreements [6][12] - Product revenues increased by 44% to about $809,000 compared to $563,000 in the prior year, attributed to successful distribution partnerships [6][12] - Gross loss improved to approximately $700,000 from a loss of $1.4 million a year ago, reflecting savings in total cost of revenue [8][12] - Operating expenses decreased by 9% year-over-year to $6.2 million from $6.8 million in 2024 [10][12] - Net loss after accounting for other income and expenses was about 11% lower than the prior year's loss of $7.6 million [12] Business Line Data and Key Metrics Changes - Research and development expenses were about $2.1 million, a 35% increase year-over-year, reflecting continued investment in product innovation [10][12] - Sales and marketing expenses decreased by 15% to $1.3 million, due to strategic changes in the go-to-market strategy [11][12] - General and administrative expenses were $2.8 million, down from $3.6 million the previous year, primarily due to cost discipline [11][12] Market Data and Key Metrics Changes - The company reported a total backlog of approximately $2.5 million, consisting of $1.9 million in ECDs and $600,000 in ASR-related orders [51] Company Strategy and Development Direction - The company is focused on achieving positive gross margins, scaling services and product footprint, and operating with increased efficiency and discipline [14][12] - Management emphasized the importance of executing long-term goals while navigating external uncertainties, such as tariffs and macroeconomic factors [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's progress and the effectiveness of recent changes made over the past fifteen months [15][17] - The company is navigating macro uncertainties but believes that opportunities exist, particularly in the context of national security and safety [21][25] - Management highlighted the importance of focusing on long-term shareholder value rather than short-term profitability [32][56] Other Important Information - The company is in the process of moving to a new facility, which is expected to enhance collaboration and efficiency, although some disruption risks are anticipated during the transition [47][49] - The company has made significant changes to its management structure, including the termination of 40% of the management team to improve efficiency [39][56] Q&A Session Summary Question: How is macro uncertainty impacting customer conversations? - Management noted that while political uncertainty has less direct impact, financial factors like tariffs could affect component pricing and lead times [21][22] Question: Is the per-share loss improvement due to the reverse split? - The reverse stock split occurred in September 2024, and the per-share price reflects this adjustment [28][29] Question: When will the company report positive EBITDA and earnings? - Management indicated that while they are focused on achieving positive earnings and EBITDA, the timing is still uncertain [30][31] Question: What is the impact of the Doge program on federal security customers? - The program has created some challenges due to personnel changes but also presents opportunities for more efficient security solutions [34][35] Question: What are the biggest obstacles in ramping up the customer base? - Management cited funding as a significant challenge, impacting the ability to scale operations and grow the customer base [60][62] Question: How does the order book look? - The company reported a backlog of approximately $2.5 million, indicating a healthy order pipeline [51] Question: What are the plans for the new headquarters? - The new facility is expected to enhance operational efficiency, with some anticipated costs and disruptions during the move [74][75]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $2.9 million, a 29% increase from $2.3 million in Q1 2024, driven by growth in both service and product revenue [6][12] - Service revenues grew to approximately $2.1 million, up 25% from $1.7 million the previous year, primarily due to strength in ASR subscriptions and full-service maintenance agreements [6][12] - Product revenues increased by 44% to about $809,000 compared to $563,000 in the prior year, attributed to distribution partnerships and expanding deployments [6][12] - Gross loss improved to approximately $700,000 from $1.4 million a year ago, with cost of revenue slightly lower at $3.6 million compared to $3.7 million in Q1 2024 [8][12] - Operating expenses decreased by 9% year-over-year to $6.2 million, with R&D expenses up 35% to $2.1 million, while sales and marketing expenses were down 15% to $1.3 million [9][10][12] - Net loss for the quarter was about $7.6 million, an improvement from $8.3 million in Q1 2024, with earnings loss per share improving to $1.29 from nearly $4 per share last year [11][12] Business Line Data and Key Metrics Changes - The company is focused on achieving positive gross margins, scaling services and product footprint, and operating with increased efficiency [13] - The ASR (Autonomous Security Robots) and ECD (Emergency Communication Devices) segments are showing growth, with a backlog of approximately $2.5 million, including $1.9 million in ECDs and $600,000 in ASR-related orders [48] Market Data and Key Metrics Changes - The company is navigating macroeconomic uncertainties, particularly regarding tariffs, which may impact component pricing and lead times [18][20][21] - The management believes that the focus on national safety and security could provide tailwinds for the business despite the uncertainties [19][22] Company Strategy and Development Direction - The company is committed to long-term growth and shareholder value, focusing on scaling operations and investing in new technologies [28][55] - The management is actively pursuing government contracts and has established a Washington office to foster relationships with federal agencies [86][88] - The company is moving to a new facility to consolidate operations and improve efficiency, with plans for enhanced production capabilities [67][70] Management's Comments on Operating Environment and Future Outlook - Management expresses a positive outlook, emphasizing the importance of execution and the progress made in the past year [15][16] - The company acknowledges the challenges faced in the past, particularly related to funding, but is optimistic about the changes implemented [58][60] Other Important Information - The company is undergoing a significant transition, including moving to a new facility and restructuring its management team [34][52] - The management is focused on maintaining operational efficiency while scaling revenue and minimizing costs [39][40] Q&A Session Summary Question: How is macro uncertainty impacting customer conversations? - Management noted that while political uncertainty has less direct impact, financial aspects like tariffs could affect component pricing and lead times [18][20] Question: When will the company report positive EBITDA and earnings? - Management indicated that while they are focused on achieving positive earnings, the timing is yet to be determined [26][32] Question: What happened to Stacy Stevens? - The position was eliminated as part of a broader restructuring to improve efficiency [34] Question: How quickly will additional cost infrastructure be needed as revenue scales? - Management stated that they are cautious about adding costs and will scale revenue first before increasing infrastructure [35][36] Question: What is the status of the new facility? - The new facility is expected to be operational by August, with some anticipated disruptions during the move [43][46] Question: How does the order book look? - The current backlog is approximately $2.5 million, with significant orders in both ECDs and ASRs [48] Question: What are the plans for government contracts? - The company is actively pursuing additional government contracts and has already won a phase one contract with the Air Force [86][88]

Company Overview - Knightscope, Inc. (KSCP) is expected to report a year-over-year increase in earnings driven by higher revenues for the quarter ended March 2025, with a consensus estimate indicating a quarterly loss of $1.47 per share, reflecting a change of +63.3% year-over-year [1][3] - Revenues are projected to be $2.68 million, which represents a 19.1% increase from the same quarter last year [3] Earnings Expectations - The consensus EPS estimate has remained unchanged over the last 30 days, indicating that analysts have not significantly reassessed their initial estimates [4] - The Most Accurate Estimate for Knightscope is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -11.95%, suggesting a bearish outlook from analysts [10] Historical Performance - In the last reported quarter, Knightscope was expected to post a loss of $1.88 per share but actually reported a loss of $0.78, resulting in a positive surprise of +58.51% [12] - Over the past four quarters, the company has only beaten consensus EPS estimates once [13] Industry Context - In the Zacks Technology Services industry, Bitfarms Ltd. (BITF) is expected to report a loss of $0.04 per share for the same quarter, indicating a year-over-year change of -100%, with revenues expected to be $65.47 million, up 30.1% from the previous year [17] - Bitfarms has seen a 16.7% downward revision in its consensus EPS estimate over the last 30 days, resulting in an Earnings ESP of -36.36% [18]

Core Viewpoint - Knightscope, Inc. (KSCP) has shown a significant price increase of 24.4% over the past four weeks, with a mean price target of $17.67 indicating a potential upside of 250.6% from the current price of $5.04 [1] Price Targets and Estimates - The mean estimate consists of three short-term price targets with a standard deviation of $12.50, where the lowest estimate of $9 suggests a 78.6% increase, and the highest estimate of $32 indicates a potential surge of 534.9% [2] - A low standard deviation among price targets suggests a high degree of agreement among analysts regarding the stock's price movement direction and magnitude [9] Analyst Sentiment and Earnings Estimates - Analysts have shown increasing optimism about KSCP's earnings prospects, as evidenced by a strong consensus in revising EPS estimates higher, which correlates with potential stock price increases [11] - Over the last 30 days, one estimate has increased, leading to a 6.9% rise in the Zacks Consensus Estimate for the current year [12] - KSCP holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors, indicating strong potential for near-term upside [13]

Federal Contracts and Market Position - Knightscope has obtained FedRAMP Authority to Operate (ATO) in January 2024, enabling it to pursue federal contracts, including a pilot program with the U.S. Department of Veteran Affairs for the K5 GOV ASR[21]. - The U.S. physical security market is projected to reach $56.8 billion by 2030, driven by technological advancements and heightened public safety concerns[29]. - The company has been awarded a Phase 1 contract from the U.S. Air Force in 2025, further solidifying its position in the federal market[44]. - The company is actively seeking additional government contracts, including a Phase 1 contract from the U.S. Air Force, which may expose it to risks such as early termination and regulatory scrutiny[122]. Product Development and Innovation - Knightscope aims to expand its installed base of Autonomous Security Robots (ASRs) through a Machine-as-a-Service (MaaS) subscription model, enhancing long-term revenue streams[41]. - The K7 Autonomous Security Robot is planned for production in 2026, designed for large environments like airports and industrial zones, enhancing automated perimeter patrolling[45]. - Knightscope's ASRs provide 24/7 monitoring capabilities, reducing reliance on human security personnel and improving incident response times[33]. - Knightscope's comprehensive suite of solutions includes ASRs, emergency communication devices (ECDs), and the cloud-based Knightscope Security Operations Center (KSOC)[191]. - The company is investing in new product development, including the K7 ASR, and has increased its R&D headcount to support these initiatives[207]. Financial Performance and Challenges - The Company incurred a net loss of $31.7 million for the year ended December 31, 2024, compared to a net loss of $22.1 million for the year ended December 31, 2023, with an accumulated deficit of $193.2 million as of December 31, 2024[62]. - Cash and cash equivalents on hand were $11.1 million as of December 31, 2024, up from $2.3 million as of December 31, 2023[62]. - The Company had a total backlog of approximately $1.7 million as of December 31, 2024, consisting of $0.4 million related to ASR orders and $1.3 million related to ECD orders[56]. - The company expects fluctuations in financial results due to various unpredictable factors, including client demand and economic conditions[76]. - The company projects operating losses and negative cash flows for the foreseeable future, raising substantial doubt about its ability to continue as a going concern[130]. Operational and Management Structure - The Company has a total of 71 full-time employees as of December 31, 2024, and is not a party to any collective bargaining agreements[58]. - The company appointed a new Chief Financial Officer and reduced approximately 40% of executive and senior leadership roles to enhance operational efficiency[203]. - The company has implemented a series of strategic and structural changes to optimize resources and reduce costs, including relocating production and renegotiating long-term client contracts[213]. - The company anticipates continued impacts from its strategic actions into 2025 as it completes transitions and drives further efficiencies across the business[208]. Competition and Market Dynamics - The U.S. security guard industry faces labor shortages, with turnover rates ranging from 100% to 400% annually, driving demand for automated solutions[29]. - The company competes with traditional public safety services, autonomous security robotics, and emergency communication systems, with key competitors including Allied Universal, Asylon Robotics, and Code Blue Corporation[51]. - Increased competition from other companies developing physical security technology may impact the company's market position[98]. - The company may face increased competition in the private security industry, which could result in reduced prices and lower gross margins[121]. Regulatory and Compliance Issues - Compliance with evolving privacy laws and regulations could limit the company's ability to deploy technologies in various markets[99]. - The regulatory framework for privacy and security is rapidly changing, potentially requiring the company to modify its business practices[100]. - The California Consumer Privacy Act (CCPA) imposes specific requirements on businesses processing personal information of California residents, which could affect the company's operations[101]. - Noncompliance with data protection laws like the GDPR could result in fines of up to €20 million or 4% of annual global revenues[103]. - The company is subject to the UK GDPR, which carries penalties of up to £17.5 million or 4% of global annual revenue for noncompliance[104]. Cybersecurity and Risk Management - Knightscope's management team is focused on cybersecurity risk management, with Mercedes Soria serving as the Chief Intelligence Officer and CISO, overseeing the cybersecurity program[165]. - The company utilizes external service providers to assist with cybersecurity assessments and incident response[166]. - Knightscope's cybersecurity practices include employee training and a third-party risk management evaluation process for key service providers[166]. - The company is dependent on its cybersecurity risk management program, and any security breaches could lead to significant financial and reputational damage[114]. Supply Chain and Operational Constraints - The company has experienced supply chain constraints and increased costs for materials, components, and freight due to geopolitical conflicts and inflationary pressures, which may negatively impact financial performance[127]. - The Company relies on over 100 suppliers for its manufacturing needs, with the top three suppliers being Alco Metal Fab, Sybridge Digital Solutions LLC, and E and M Electric and Machinery Inc.[48]. Stock and Financing - The company issued unsecured Public Safety Infrastructure Bonds totaling approximately $4.3 million, with a 10% annual interest rate starting December 31, 2024[92]. - The company may need to engage in equity or debt financings to secure additional funds for operations and product development[130]. - The company has never paid cash dividends on its Class A Common Stock and does not anticipate doing so in the foreseeable future[136]. - Future issuances of debt securities may adversely affect the return on investment from Class A Common Stock, as these securities would rank senior in bankruptcy or liquidation[138]. Asset Management and Valuation - Finished ASRs net value decreased slightly from $8,845,000 in 2023 to $8,765,000 in 2024, a decline of 0.9%[223]. - The total value of raw materials decreased from $3,841,000 in 2023 to $2,465,000 in 2024, a decline of 35.7%[223]. - The company did not record any impairment losses for ASRs or other long-lived assets for the years ended December 31, 2024 and 2023[224]. - The total value of finished ASRs net increased from $3,429,000 in 2023 to $5,978,000 in 2024, an increase of 74.5%[223].

Financial Performance - Estimated preliminary financial results for the fiscal year ended December 31, 2024, indicate a revenue of approximately $53.1 million, with an estimated $11 million for the fourth quarter[7]. - Knightscope has raised over $40 million in 2024, improving its balance sheet and corporate governance structure[42]. - Knightscope aims to significantly grow its revenue profitably through a diversified business model that includes recurring revenue streams[31]. Market Opportunities - Knightscope targets a total addressable market (TAM) of $230 billion, with specific segments including $57 billion for public safety and government by 2025[28]. - The U.S. security services industry is projected to grow significantly, with estimates indicating a market size increase to $50 billion by 2028, reflecting a compound annual growth rate (CAGR) of 5% from 2023[1]. - The autonomous security robots market is expected to reach $2.5 billion by 2028, growing at a CAGR of 20% from 2023[2]. - Emergency communication systems are forecasted to grow at a CAGR of 8% from 2023 to 2030, with the market size anticipated to reach $10 billion by 2030[3]. - U.S. public and private sector security spending is estimated to exceed $300 billion in 2023, with a projected increase of 6% annually[4]. - The critical infrastructure protection and perimeter security market is expected to grow to $15 billion by 2028, with a CAGR of 7% from 2023[5]. - Retail security and loss prevention spending is projected to reach $20 billion in 2023, reflecting a 5% increase from the previous year[6]. - K-12 and higher education campus security budgets are estimated to grow by 4% in 2023, reaching a total of $5 billion[7]. - The casino and hospitality security expenditures are expected to increase to $3 billion by 2027, with a CAGR of 6%[8]. - The multifamily housing security market is projected to grow by 5% annually, reaching $8 billion by 2023[9]. Product Development - The company plans to launch the K7 Autonomous Security Robot and K1 Super Tower by 2026, enhancing its product offerings[7]. - Knightscope's autonomous security robots (ASR) operate on a subscription model ranging from $1 to $11 per hour, providing a cost-effective alternative to traditional security services[26]. - Knightscope's technology generates over 200 terabytes of data annually per machine, providing real-time intelligence and physical deterrence against crime[21]. Strategic Initiatives - The company is focusing on organic and inorganic growth, including partnerships with Verizon Frontline to enhance telecommunications for first responders[40]. - The management team has undergone restructuring, reducing the management team by one-third and optimizing operations for future growth[43]. - Knightscope's proprietary market projections indicate a strong demand for security solutions, with anticipated revenue growth driven by customer requests for proposals (RFPs) and competitive landscape analysis[10]. Regulatory and Compliance - The company has achieved Authority to Operate (ATO) with the U.S. Federal Government, positioning itself for long-term sustainable growth[7].

Revenue Performance - Total revenue for the three months ended September 30, 2024, was $2.535 million, a decrease of 23.8% compared to $3.324 million for the same period in 2023[21]. - Service revenue for the three months ended September 30, 2024, was $1.861 million, down from $1.915 million in the same period last year, reflecting a decline of 2.8%[21]. - Product revenue decreased significantly to $674,000 for the three months ended September 30, 2024, compared to $1.409 million in the prior year, representing a decline of 52.1%[21]. - Total revenue for Q3 2024 decreased by approximately $0.8 million to $2.535 million, with service revenue at $1.861 million (73% of total) and product revenue at $0.674 million (27% of total)[143]. - Total revenue recognized from ASRs for the nine months ended September 30, 2024, was $1,324 million, with $1,211 million recognized at a point in time and $1,143 million recognized over time[76]. - Total revenue, net for the nine months ended September 30, 2024, was approximately $8.0 million, a decrease of approximately $1.8 million or 18% compared to the same period in the prior year[158]. Financial Losses - Gross loss for the three months ended September 30, 2024, was $(700,000), compared to a gross profit of $50,000 for the same period in 2023[21]. - Net loss for the three months ended September 30, 2024, was $(10.904 million), compared to a net loss of $(8.342 million) for the same period in 2023, indicating a deterioration of 30.6%[21]. - Net loss for the nine months ended September 30, 2024, was $24,767,000, compared to a net loss of $15,584,000 for the same period in 2023, representing a 58.8% increase in losses[31]. - Gross loss for the nine months ended September 30, 2024, was approximately $2.7 million, compared to a gross loss of approximately $0.2 million for the same period in 2023[164]. Operating Expenses - Total operating expenses increased to $7.041 million for the three months ended September 30, 2024, up from $6.533 million in the same period last year, marking an increase of 7.8%[21]. - Total operating expenses increased to $7.041 million (278% of total revenue) in Q3 2024, up from $6.533 million (197% of total revenue) in Q3 2023[142]. - Research and development expenses for the nine months ended September 30, 2024, were $414,000, compared to $274,000 in the prior year[96]. - Research and development expenses increased by approximately $0.2 million, or 4%, for the nine months ended September 30, 2024, primarily due to higher headcount[165]. - Sales and marketing expenses decreased by approximately 28% to $1.000 million, representing 39% of total revenue in Q3 2024[150]. - General and administrative expenses increased by approximately 31% to $4.238 million, representing 167% of total revenue in Q3 2024[151]. Cash and Assets - Cash and cash equivalents as of September 30, 2024, were $5.199 million, significantly up from $2.282 million as of December 31, 2023[19]. - Total current assets increased to $11.529 million as of September 30, 2024, compared to $8.213 million as of December 31, 2023, reflecting a growth of 40.5%[19]. - Cash and cash equivalents increased to $5,301,000 as of September 30, 2024, up from $4,711,000 at the end of September 2023[31]. - The company reported a net loss of approximately $24.8 million for the nine months ended September 30, 2024, leading to net cash used in operating activities of approximately $17.4 million[186][187]. Stock and Equity - Total stockholders' equity improved to $9.255 million as of September 30, 2024, compared to a deficit of $(26.634 million) as of December 31, 2023[19]. - The company executed a 1-for-50 reverse stock split of its common stock in September 2024, impacting share amounts[26]. - The company executed a reverse stock split of Class A and Class B Common Stock at a ratio of 1-for-50, effective September 13, 2024[64]. - The company issued 1,470,537 shares of Class A Common Stock under the at-the-market offering program, generating net proceeds of approximately $20.4 million during the nine months ended September 30, 2024[177]. Liabilities - Total liabilities as of September 30, 2024, were $15.667 million, slightly up from $15.405 million as of December 31, 2023[19]. - The company has outstanding obligations of approximately $1.8 million under the August 2024 Note as of November 13, 2024[183]. - The company’s total liabilities included warrant liabilities of $5,692 million for Series S Preferred Stock as of September 30, 2024[81]. Future Outlook and Financing - The company is dependent on additional fundraising to sustain ongoing operations, indicating a need for further capital within the next twelve months[37]. - The company is pursuing additional financing through equity and/or debt alternatives to meet its capital and operational needs[171]. - The company plans to seek additional funding, which may result in the dilution of existing stockholders' interests[171].

Core Insights - Verizon Business has partnered with Knightscope to enhance safety at commercial and government facilities through the deployment of autonomous security robots and emergency communication devices [1][5] - The Knightscope K5 security robot has received a FedRAMP Moderate Authority to Operate designation, indicating its compliance with security standards [2] - Verizon aims to integrate 5G technology into the K5 ASR, enhancing its capabilities for real-time data transmission and monitoring [3] Company Developments - The K5 ASR operates autonomously in large outdoor spaces and is designed to function in extreme weather conditions, providing continuous surveillance [3] - Verizon also supports Knightscope's K1 Blue Light Tower and E-Phones, which are wireless emergency communication devices that operate independently and assist first responders [4] - The partnership with Knightscope is part of Verizon's broader strategy to serve the U.S. Department of Veterans Affairs, including a $448.3 million expansion to supply mobile devices and critical communications support [5] Financial Performance - Verizon generated revenues of $134.0 billion in 2023, showcasing its strong market position and commitment to innovation [6]

Financial Data and Key Metrics Changes - For Q2 2024, total net revenues were reported at $3.2 million, a decrease of $0.4 million or 10% compared to the same period last year, primarily due to lower product revenue offsetting gains in services revenue [33] - Services revenue increased by $0.1 million to approximately $2 million, while product revenue declined by $0.5 million to approximately $1.3 million due to a lack of a large one-time sale that occurred in the prior year [33] - The company recorded a gross loss of $0.6 million, a significant change from a gross profit of $9,000 reported in the prior year [35] - Net loss for the quarter was $6.3 million, approximately $1.5 million higher than the prior year, with a basic and diluted net loss per share of $0.05 compared to a loss of $0.08 in the prior year [38] Business Line Data and Key Metrics Changes - The K1B product line contributed approximately two-thirds of the business, while ASR-related products accounted for about one-third of revenues [51] - The K1 Hemisphere product has been introduced and is expected to drive initial growth, with various applications being explored [50] Market Data and Key Metrics Changes - The company believes it is targeting a multibillion-dollar market opportunity in public safety, law enforcement, and security, which is seen as ripe for disruption through robotics and AI [5][6] - The potential for a $40 billion recurring revenue opportunity is anticipated once the business model is fully established [7] Company Strategy and Development Direction - The company is focused on cleaning up its balance sheet and aligning with public company structures, which includes converting preferred shares to common shares [42][44] - Strategic initiatives include the development of the Intelligence Control Module (ICM) to unify various product architectures and improve operational efficiencies [17][46] - The company aims to scale up operations while reducing costs and improving efficiencies across its product lines [12][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that 2024 is a transition year, with expectations of continued challenges as the company implements significant changes [34][41] - The management expresses confidence in the long-term potential of the company, emphasizing the importance of execution and operational improvements [2][3] Other Important Information - The company has raised over $5 million in funding and continues to utilize an active ATM program for capital [45] - The company has successfully deployed its first K5 government machine at a U.S. Department of Veterans Affairs Hospital [9] Q&A Session All Questions and Answers Question: What were the orders for K1 Hemisphere versus a year ago? - The K1 Hemisphere was not in production a year ago, and it is now seen as an initial growth driver with various applications being explored [50] Question: What percentage of sales are ASRs versus the Blue Light products? - Approximately two-thirds of the business is K1B-related, while about one-third is ASR-related [51] Question: How much cash on hand on the balance sheet at the end of Q2? - Cash on hand was reported at $2.6 million at the end of the quarter, oscillating between $2 million and $5 million over the last 18 months [55] Question: What is the status of the investigation into possible legal actions of the short seller? - The investigation is ongoing, and there are no updates to provide at this time [60] Question: Why do press releases mention new contracts but not their impact on profit loss? - Announcements of new contracts are made to assist the sales team and provide visibility, but the financial impact may not be immediate [62]